Q. I have heard that the government is planning to sell its stake in the part-nationalised banks. Is this true and, if so, will I have the opportunity to purchase shares?
A. George Osborne, the Chancellor of the Exchequer, announced recently that the government is considering selling its shares in Lloyds Banking Group. However, it is unlikely to be in a position to divest its interest in the Royal Bank of Scotland for some time yet.
Indeed, the government is considering splitting RBS into a “good bank” and “bad bank” – removing RBS toxic assets from it balance sheet (in much the same way as the government did with Northern Rock) – thus speeding up the process of returning the “good bank” to the private sector. Mr Osborne will announce whether he is to split RBS into a “good bank” and “bad bank” by the autumn.
It has been announced that the first tranche of Lloyds shares will be made available to institutional investors, with a second wave being offered to the general public at a later stage. George Osborne stated that investor interest is growing and the government’s appetite is increasing, especially as Lloyds shares are currently trading around the level which would see the government make a small return on in its investment.
However, you ought to take stock before purchasing individual shares such as those in Lloyds Banking Group. Whether such a decision would be in your best interests depends upon a number of factors. I recommend therefore that you seek advice from a chartered financial planner before making such a commitment.
Q. I am the Finance Director of a medium-sized employer. I have receive a letter from the Pension Regulator informing me of my “staging date” by which time I shall have to comply with the obligations imposed by the auto-enrolment regime. A colleague suggested that the government’s Pensions Bill will, if enacted, suspend the auto-enrolment regime. Is this correct?
A. No. I suspect your colleague is referring to an amendment that has been added to the Pensions Bill which could exempt companies from enrolling automatically certain employees who would not benefit from being enrolled into a workplace pension scheme.
The addition of clause 34 into the Bill will provide future governments with the ability to suspend an employer’s auto-enrolment obligations in respect of specific categories or descriptions of workers. The amendment is an acknowledgement by the DWP that, in certain circumstances, the benefits of being enrolled automatically are outweighed by “practical, legal or financial consequences” for some categories of employees.
Obvious examples are those people with substantial retirement savings and who have enhanced protection or fixed protection and do not wish to risk losing that protection and those employees who have handed in their notice and/or are set to retire when their employer reaches its staging date.
However, in a recent briefing paper, the DWP confirmed that it remains committed to auto-enrolment for all employers. If you have any concerns regarding your compliance with your obligations under the auto-enrolment regime or you need assistance in identifying and implementing an appropriate pension scheme, I recommend that you seek assistance from a chartered financial planner who specialises in workplace pensions.
Q. I am the HR Manager of a local business and I have responsibility for our legacy final salary pension scheme. The costs of managing the scheme have increased significantly in recent years, to the extent that they have prevented us investing in the business to the extent to which we would have wanted. One of the trustees stated recently that the costs of running the scheme – in particular the PPF levy – are set to increase. Is this correct?
A. Yes, the Pension Protection Fund (the “lifeboat” fund intended to provide members of a final salary pension scheme with a minimum level of benefits in the event that their employer becomes insolvent) has announced that the annual levy paid by defined benefit pension schemes to fund the PPF is set to increase by an average of 10% when it is reviewed in September.
The PPF has stated that the reason for the increase is the greater risk to which the PPF is exposed due to historically high scheme deficits. Last year, the total annual claims on the PPF exceeded £1bn and, for the first time, exceeded the amount collected via the levy.
There are a number of measures you can take however in order to mitigate the PPF levy and/or the costs of running your scheme. I recommend therefore that you seek advice from your pensions consultant and/or a chartered financial planner who specialises in defined benefit pensions and liability management.
If you have a question you would like Trevor to answer, please email it to: yourmoney@rwpfg.co.uk or post it to Your Money, Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS.
0191 217 3340
